Which of the following is true regarding the cash value of variable life insurance?

Which of the following is true regarding the cash value of variable life insurance?

• A. It is guaranteed not to fluctuate
• B. It can be invested in various options, affecting both cash value and death benefit
• C. It is maintained in one fixed interest account
• D. It accumulates only at the end of the policy term

Answer: (B)

The cash value of variable life insurance is unique because it can be invested in a variety of investment options, such as stocks, bonds, or mutual funds. This flexibility allows policyholders to choose how their cash value is allocated among these options, which can lead to growth that is dependent on the market performance of the selected investments. Consequently, both the cash value and the death benefit can fluctuate based on investment performance. This characteristic is what distinguishes variable life insurance from other types of life insurance that might offer guaranteed cash value. The ability to choose investment options provides the policyholder with potential for greater returns, but it also comes with the risk of loss, making it important for individuals to understand this aspect when considering variable life insurance policies.

The cash value of variable life insurance is unique because it can be invested in a variety of investment options, such as stocks, bonds, or mutual funds. This flexibility allows policyholders to choose how their cash value is allocated among these options, which can lead to growth that is dependent on the market performance of the selected investments. Consequently, both the cash value and the death benefit can fluctuate based on investment performance. This characteristic is what distinguishes variable life insurance from other types of life insurance that might offer guaranteed cash value. The ability to choose investment options provides the policyholder with potential for greater returns, but it also comes with the risk of loss, making it important for individuals to understand this aspect when considering variable life insurance policies.